President Joe Biden ran on a pledge not to increase taxes on any American earning less than $400,000 per year. However, his corporate tax hike would harm middle-class Americans earning below this threshold as the left-of-center Tax Policy Center’s Len Burman notes in a recent post.
In his post, Burman asks and answers the question of whether middle class families would be harmed by the Biden corporate tax hike:
“Does a corporate tax increase or a financial transaction tax raise taxes on shareholders, including the millions of middle-class people who own 401(k) plans? (Answer: yes.)”
President Joe Biden is planning to increase the corporate tax rate from 21 percent to 28 percent in order to pay for trillions of dollars in new spending. This would impose a higher corporate tax rate than Communist China’s 25%.
Biden is trying to convince the American people that his trillions of dollars in tax hikes will not harm them.
However, this is not true. A corporate tax hike would harm middle class workers and savers. For instance:
- Raising the corporate tax rate would reduce the value of stocks, and therefore 401(k)s. According to recent data, 80 to 100 million Americans have a 401(k), while 46.4 million households have an individual retirement account. A majority of the assets in retirement accounts are invested in stocks. 401(k)s hold $6.2 trillion in assets and almost 70 percent of these assets (or $4.3T) are in stocks. Similarly, 53 percent of the more than $11 trillion in IRA savings are held directly in stocks while another 18 percent of savings are invested in funds that comprise stocks.
- A corporate tax rate hike would hurt anyone who has invested in the stock market, including a significant amount of young people. Half of Gen-Zers and Millennials have begun trading in stocks as a way to increase their life savings, according to recent reports.
- Raising the corporate tax rate would harm workers. The American worker is disproportionately harmed by a corporate tax hike. While capitol is mobile, labor is not. As a result, American workers see significant losses in jobs and wages because capital is flowing out of the U.S. Numerous studies have found that between 50 percent and 70 percent of the corporate tax is borne by workers with the remaining being borne by shareholders.
Biden’s corporate tax hikes harm American families and workers making less than $400,000 or less, a fact that even the left-of-center Tax Policy Center admits. As the TPC notes, this will harm millions of middle class Americans that own a 401(k) or are invested in the stock market, but will also harm American workers in the form of fewer jobs and lower wages.